Move towards OTT causing upheaval in content, telecom markets; Comcast in the middle of it all

Tom Paine

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Media convergence (an overused term), you might call it, seems to be reaching a fever pitch. Mostly, its pushing content companies together with more technology oriented enterprises.

Exhibit A is AT&T's approach to Time Warner, which resulted in an agreement this weekend under which AT&T would acquire Time Warner for $85 billion. AT&T was said to want to push the process quickly to a conclusion to keep Time Warner out of the arms of others (maybe Google, even Apple perhaps).

At&T acquired DirecTV for $49 billion last year, but is said to be planning to phase out the satellite business in 3 to 5 years and banking its future distribution on a large-scale OTT service, DirecTV Now, to be launched by the end of this year (actually November).

AT&t also appears to be deemphasizing its U-verse wired broadband service. What its ultimate network technology strategy will be - some combination of wired and wireless presumably - is not clear now.









As Fortune reported, "the logic behind AT&T acquiring Time Warner would likely be to counteract moves by Comcast, the cable giant that also owns NBC Universal, some analysts said."


Meanwhile, Comcast doubled its bet on new media darling BuzzFeed, according to Recode, increasing its investment from $200 million to $400 million. BuzzFeed is seen as a vehicle for Comcast's ambitions in non-linear video, on YouTube and other platforms outside the traditional cable stack. BuzzFeed's valuation for the deal is $1.7 billion, slightly more than it was for Comcast's first investment. There were reports, unconfirmed, that BuzzFeed badly missed its revenue targets last year.

But Sam Landman, a managing director at Comcast Ventures, is holding off on backing some recent media start-ups he’s seen, according to an LA Times article, until they demonstrate more revenue-generating ability.

Google has gained rights to all of CBS' content for its OTT service, including live NFL games, Reuters and the Wall Street Journal reported last week. The new "Unplugged" OTT service, scheduled for an early 2017 launch, will be part of Google's YouTube platform.

Also, reports last week suggested that NBCU is close to coming on board with Google's Unplugged, for much if not all of its content.

Last week also saw Comcast announce its new Comcast Technology Solutions division, a combination of its Comcast Wholesale, thePlatform and This Technology business units. Comcast Technology Solutions encompasses an Ad Platform, Video Platform and Wholesale Platform. The new unit will support the market for third-party OTT platforms and related media technology services; publisher Time Inc. is an initial client.

Verizon's results last week underscored the impact of increased wireless pricing pressures and slowing growth, and also was a reminder of its relatively weak position in content. I'll be contrarian, however, in taking the position that owning tons of content may not be an optimal course for a telecom company, and that Verizon may not be off track in its strategy.

From AT&T's point of view, however, some of the thinking behind the Time Warner deal is that the more valuable content you own, the more reciprocal power you have in negotiating for rights to other's content.